Portsmouth Prepare For Their Day In Court

Nine days to go until the big hearing then, and Portsmouth are acting bullish. Balram Chainrai has still given no indication that he is going to pay the amount of money to satisfy the club’s debt to HMRC (as some had suspected that he might), and the club has given no indication that it is going to seek the legal protection of administration. Such a move would almost certainly seal the club’s relegation from the Premier League, but it would be foolish to believe that football has anything to do with any of the reasons why the decisions that are being made at Fratton Park are being made. This is all about business, and nothing else. It’s pretty apt, really.

The club has until late tomorrow afternoon to lodge a statement of affairs at the High Court. This is paperwork which outlines the company’s exact financial position, both presently and for the near future. It lists their liabilities and outgoings and will be used by the court to determine whether the club is, in a legal sense, solvent. In other words, can they meet their day to day financial obligations? HMRC are owed £7.1m immediately from a total tax debt of £12m. If rumours are to be believed, the majority of the remainder of their debt is believed to be what would be called “soft” debt – money owed in loans to their former owners.

The reality of the situation is that if Portsmouth cannot pay the amount that they are owed to HMRC in full by Friday, they are at the mercy (in a quite literal sense) of the court, and how their financial outlook is regarded will be down to the – extremely subjective – opinion of the court. The club will make great play of future television revenue for the remainder of this season and parachute payments that they would receive in the event of relegation from the Premier League, but this is a high-risk strategy. Parachute payments aren’t a contractual obligation on the part of the authorities of the game – they are entirely discretionary and the club has no automatic “right” to them, but how will the court choose to interpret them?

It is also becoming increasingly uncertain whether the Premier League is going to ride in to the rescue and save the club with future television money. The moral argument for and against this is a different matter altogether, but it has to be said that many had expected them to. It would be very much in the best interests of the Premier League as a “brand” that a club doesn’t go bust during the middle of the season and it would certainly have been expedient for the Premier League to postpone the club’s complete finanicial meltdown until a later date by advancing them money from future television deals to save their skin in the immediate future. Perhaps there is a reason why the Premier League and Portsmouth Football Club appear so confident about it all. We shall see.

Meanwhile, though, the government is, predictably, trying to follow public opinion by making noises about tighter regulation of football clubs. Whilst it is welcome that there might finally be someone out there in a position of some power that is prepared to do something about the peculiar form of free market capitalism that football has turned into, it would be remiss of us to celebrate this as if they are finally coming around to our way of thinking. For one thing, there is a general election this year, which is likely to be informing every statement being made by ministers at the moment. For another, it still seems highly likely that we will have a different (and bluer) government by the summer. Labour ministers can say whatever they like – will they actually be here to anything about it, though?

Regardless of this, the amount that the government can actually do is very limited. If we think of the Football Association as being something like a trade association, the legal remit of politicians in being able to regulate football is very limited. The game itself expects national competitions and the clubs that compete in them to be regulated by FAs rather than government, and FIFA takes an exceptionally dim view of what it views as “meddling” by governments in the running of the game. Therefore, it is largely down to the Football Association to try and keep these people in line. Whether they will be able to do so or not is, of course, a completely different matter. The FA was effectively infiltrated by the Premier League during the 1990s. The people that need to be regulated look strikingly similar to those that are in charge of regulation.

So, we find ourselves in a stand-off situation – the calm before the storm, if you like. Unless the club comes up with the £7.1m required to settle the HMRC debt, it is impossible to predict what will happen in court a week on Friday. The club could be forced into administration by the court, which would, of course, mean a nine point deduction and almost certain relegation from the Premier League. The alternatives are that they can strike a deal with HMRC (who have given no indication of being prepared to accept such a deal) or that they can persuade the court to allow them s second adjournment in order to raise the money to settle debt, whether that be through bringing in new investment or by other means. There are nine days left to save Portsmouth Football Club. We shall see whether their high risk strategy reaps dividends on the second of March.

9 Comments

Peter
on February 17, 2010 at 8:56 am

They do not deserve any help; they tried to buy success and blew it, no sympathy here.

Peter is half right. Pompey tried to – and did – get success using a chequebook (along with astute management and player motivation) and that is annoying for other clubs but do we really believe that in football the price of trying to get better should be was massive as it will be at Portsmouth, has been at Leeds, has been at Bradford City?

If we do – apart from not saying much for the idea of competition but that is by the by – then football needs to put in place laws and rules to prevent a club spending in money the club does not have on the promise of funds in the future.

Martin
on February 17, 2010 at 10:41 am

Tighter regulation of football would be a comparatively easy and painless way for Cameron’s Tories to pretend that they’re different to Labour and aren’t still the party of un-trendy pure free market capitalism.

It’s certainly going to be an interesting couple of years.

Poppa
on February 17, 2010 at 12:46 pm

What happens if …
i)Sky go bust?
ii)The new owner goes bust after receiving Sky money?
iii)They go bust next season, do they 2011/12 money to bail them out again?
iv) Other Premiership Clubs in the same position in the future owe HMRC – will they get future money too?

Towards the end of this video, in the summing up of the debate, the Tory shadow minister for media, culture and sport, Hugh Robertson, says (at 1:47) that he is “impressed by the way the FA has conducted itself of late”. He then goes on to say (at 1:49) that the football authorities should be left to sort out its own affairs but that “government intervention remains an option”.

“The club will make great play of future television revenue for the remainder of this season and parachute payments that they would receive in the event of relegation from the Premier League, but this is a high-risk strategy. Parachute payments aren’t a contractual obligation on the part of the authorities of the game – they are entirely discretionary and the club has no automatic “right” to them, but how will the court choose to interpret them?”

There is a contractual obligation – and bear with me, because this is slightly messy, long winded, and goes round in circles – from the Premier League rules:

B.28. Subject to Rule B.29, the bottom 3 Clubs in the table at the end of the Season shall be relegated to the Football League.

B.29. If any Club ceases during the Season to be a member of the League, the record of the League Matches in which it has participated that Season shall be expunged from the table and the number of Clubs to be relegated at the end of that Season shall be reduced so as to maintain at 20 (or, if less, as near thereto as may be) the number of Clubs in membership of the League at the beginning of the next Season.

C.13. “Relegated Club” means a Football League club which was relegated under the provisions of Rule B.28 at the end of either of the 2 previous Seasons.

C.34. The balance of UK Broadcasting Money shall be divided so that:
C.34.1 one half shall comprise the Basic Award Fund;
C.34.2 one quarter shall comprise the Merit Payments Fund; and
C.34.3 one quarter shall comprise the Facility Fees Fund.
Each of the Basic Award Fund and the Merit Payments Fund shall be divided into such number of shares as shall be required in either case to put into effect the provisions of Rules C.35.1 and C.35.2 and the Facility Fees Fund shall be distributed in accordance with the provisions of Rule C.35.3. {My note – The Merit Payments Fund and Facility Fees Fund aren’t paid out to relegated clubs, so I’ve not included the rules they relate to}

C.35.1 subject to Rules C.55 and C.59, the Basic Award Fund shall be distributed by way of fees so that each Club receives 2 shares and each Relegated Club 1 share;

C.37. In consideration of Clubs providing such rights, facilities and services as are required to enable the Company to fulfil any Overseas Broadcasting Contract, as soon as practicable during or after the end of each Season, subject to Rules C.55, C.59 and I.15, the balance of Overseas Broadcasting Money shall be distributed by way of fees so that each Club receives 2 shares and each Relegated Club 1 share.

C.39. In consideration of Clubs providing such rights, facilities and services as are required to enable the Company to fulfil any Title Sponsorship Contract, as soon as practicable during or after the end of each Season, subject to Rules C.55 and C.59, the balance of Title Sponsorship Money shall be distributed by way of fees so that each Club receives 2 shares and each Relegated Club 1 share.

C.55. While pursuant to this Section of these Rules a Club is suspended or its suspension is postponed, the Board shall have power, subject to Rule C.58, to make such payments as it may think fit to the Club’s Football Creditors out of:
C.55.1 any UK Broadcasting Money payable to the suspended Club under the provisions of Rule C.35; and
C.55.2 any Overseas Broadcasting Money payable to the suspended Club under the provisions of Rule C.37; and
C.55.3 any Title Sponsorship Money payable to the suspended Club under the provisions of Rule C.39; and

C.59. Any distribution to a Relegated Club under the provisions of Rules C.35, C.37 or C.39 may be deferred if, on or before the date of the distribution, the Relegated Club has been given notice under article 4.5 of the articles of association of the Football League which has been suspended. Upon such notice being withdrawn the deferred distribution shall be paid but if in consequence of the notice the club to which it was due ceases to be a member of the Football League its amount shall be added to the next distribution made in accordance with these Rules.

I.15. If a Club fails to provide any of the facilities required by Rules I.13 or I.14, the Board may withhold from that Club its share of Overseas Broadcasting Money to which it would otherwise be entitled pursuant to Rule C.37 until such time as it has provided those facilities.

Pompey ‘bought success’ by spending money on players, unlike every other club, of course, who operate on a strictly amateur basis. Oh wait.

I don’t understand that line of attack at all – we spent money unsustainably in the long run, that much is clear, but at the time we had it to spend thanks to investment from Sacha Gaydamak. In that respect we are absolutely no different from any other club who depend on investment or loans from their owners to operate. If there is a problem with that approach, which there evidently is, it is not a problem with Pompey but a problem with football as a whole. If our demise is worth anything it will be worth it if people wake up to this fact; unfortunately, it seems too many people will just blame the club exclusively and do nothing about any other part of the problem.

Martin
on February 17, 2010 at 4:19 pm

Jack, you’re no different to many other clubs, patently.

But you are most definitely the one caught swimming naked when the tide went out.

Tighter regulation of football would be a comparatively easy and painless way for Cameron’s Tories to pretend that they’re different to Labour and aren’t still the party of un-trendy pure free market capitalism.

They are, however, ewntirly beholden to Mr Rupert Murdoch, and Mr Murdoch isn’t going to like it, is he?